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Strategies & Market Trends : Commodities - The Coming Bull Market -- Ignore unavailable to you. Want to Upgrade?

To: craig crawford who wrote (812)	9/23/2001 7:17:54 PM
From: craig crawford	Read Replies (1) \| Respond to of 1643

Zinc market smarting as Pasminco struggles au.dailynews.yahoo.com Thursday 20 September 2:28 PM By James Regan SYDNEY, Sept 20 (Reuters) - Pasminco Ltd, set to continue churning out ore and metal from its far-reaching network of mines and smelters as it wrestles with crippling debt, faces waning demand for lead and zinc in world markets, commodities analysts said on Thursday. Zinc prices have fallen to their lowest ever and inventories of unsold metal are mounting, they said. "There is just too much metal at the moment," said Peter Berry of the Australian Bureau of Agricultural and Resource Economics. At least for now, the company's operations will keep running, Pasminco administrator John Spark of Ferrier Hodgson said. "The sites are where the money is made at this organisation and we want to make sure it is business as usual," Spark said. Pasminco called in administrators late on Wednesday after some of its lenders balked at a proposed six-month standstill repayment agreement. Spark put Pasminco's debts at about A$2.9 billion. He said the company would continue its business as usual. Pasminco, one of the world's largest producers of zinc and lead, spent heavily in the last few years to cobble together a tangle of co-dependent mines and smelters in Australia, the United States and the Netherlands. HANDS FULL But a promising surge in demand for base metals was cut short, first by the Asian financial crisis, then by a wider slowdown in worldwide industrial production. Last week Pasminco posted a net loss of A$715.7 million, citing falling metals prices compounded by bad currency hedges and hefty writedowns. Analysts said administrators will have their hands full as they attempt to put Pasminco back on track or move to liquidate. Most think it will be several years at the earliest before zinc demand picks up in the U.S., where Pasminco operates one of the country's largest smelters, in Clarksville, Tennessee. Zinc prices at the London Metal Exchange fell to a record low US$809 a tonne in the last trading session, with expectations of further declines to come. "The zinc price just keeps falling," said David Thurtell, commodities analyst for Commonwealth Bank of Australia Ltd. Zinc is chiefly used as an anti-corrosive alloy in galvanised steel, a market also reeling from waning industrial activity. Lead, already out of favour with environmentalists and losing market share in everything from gun shot to wine labels, is largely produced as a by-product of zinc. Inventories of unsold zinc at the LME had climbed to 358,675 tonnes as of Wednesday, compared with 194,775 tonnes the same time a year ago. WHERE'S THE BOTTOM? "It is difficult to envisage a floor being reached in the absence of any production cuts," Standard Bank of London metals analyst Robin Bahr said in a report. On the contrary, world zinc mine production is forecast to grow 1.1 percent in 2001 and a further 1.3 percent in 2002, said ABARE's Berry. "The Chinese are still pushing out a lot of zinc at a time when global consumption is falling," Berry said. So far, Pasminco has shown no desire to scale back its own operations. Its recently developed Century zinc mine in Australia, one of the world's largest, is on track to reach maximum production levels by the end of this year, churning out enough intermediate zinc concentrate to produce a half-million tonnes of metal a year. The mine's low iron-bearing ore means it is the sole supplier of feed to the company's Budel smelter in the Netherlands and also feeds other Pasminco and third party smelters, mostly in Australia. But even if Pasminco was forced to sell the Century mine -- Pasminco managing director Greig Gailey said at least 10 groups have expressed interest -- it is doubtful production levels will decline. Australia's MIM Holdings Ltd (ASX: MIM) and Canada's Teck-Cominco TEKb.TO are seen by analysts as potential buyers of Century. "Who is going to buy something just to shut it down?" said an executive with a rival mining company. Three other Pasminco smelters in Australia are also running at high production rates.